Volodymyr Ishchenko: How would you analyse eastern Europe from the perspective of the global system? Or which paradigm should we apply in order to analyse eastern Europe? Is the western Marxist paradigm really working here, or should we readjust it in order to understand this society better?
Don Kalb: Of course it’s a big world area with a lot of differentiation within it. The recent book by my CEU colleagues Bela Greskovits and Dorothee Bohle, which compares capitalisms across the region, is focused on central Europe, so it excludes Ukraine and Russia. They basically decide, after looking at all the literature and generating a lot of new fresh data, that all the systems have become basically neoliberal: for Poland, they talk about embedded neoliberalism, for the Baltic countries it’s just neoliberal, Slovenia was an outlier for a while, but clearly now it’s being pressed in a neoliberal direction. So, that is their conclusion about institutional relationships in central European countries.
No surprise, for my part. I think, methodologically speaking, if you want to analyse the Second World, in terms of its own evolution within the shifting paradigms of the global era, then you need a sort of dialectical double perspective: a dynamic world-systemic perspective from which to look at particular historical trajectories, in order to see how the latter get inserted into the former and how the specificities of that insertion work to produce a direction of process both locally and globally. So that is a sort of deepened and more relational world-systemic point of view on the area. Joseph Borocz has been trying this out from a macrohistorical perspective, as has Boris Kagarlitsky of course. As have Martin Myant and Jan Drahokoupil, with a wealth of statistical national data. My own work tries it too but a stronger micro component.
VI: Could you list some further examples of this relational world-system analysis?
DK: I am not satisfied with the existing examples, but it seems to me that this is where, methodologically, most advanced work is heading. When you look at these two methodological perspectives, then, the world-systemic perspective comes first. In a dynamic, open, flexible way, Wallerstein is just a guideline. And the importance of prioritizing that, for me, is that you go beyond easy conceptions of post-socialism or post-Soviet realities, where you explain most of the current realities on the basis of past trajectories. I’m very much against that because, I think, what we are seeing is a region that is occupying a particular place in the world capitalist system as such. The old relationships, the old institutions that have been restructured or destroyed, continue to have particular local names. This particular local vocabulary continues to signify current relationships but it does not capture the real functioning of these relationships. That’s why I would prefer to prioritize the world-systemic side.
Of course, there is a big differentiation in the region, and whether you became, as a post-socialist country, a manufacturing site for European capital or a global commodities exporter matters. Central Europe is becoming the former, the Baltics are becoming adjunct to Scandinavian capitalism in many ways, Romania is now increasing its integration into German, French and Italian networks. Bulgaria has been somehow integrated into Greek capitalism.
So, I think, these trajectories have by now consolidated. Now the sort of manufacturing that you get is increasingly high quality, but it requires specialist input from the West, so it does not generate a real mass of high quality local employment. And also, when you look at the actual wages that engineers start on, it’s often still well below a thousand euros in places like Hungary, where median incomes are still around 400 euros a month, a whole generation after 1989. Even the better-paid workers get three times less than similar people in Austria. This is how the relationships are and this is the slot that post-socialist places are offered. Capital comes for low wages but skilled and disciplined work. And then it turns out that firms such as Audi and Mercedes make hardly any use of local suppliers: so you get a classical dual economy.
I don’t see this changing radically in the next 20 or 30 years, I must say. First of all, everything is dependent on western demand. Poland is the only country that has some investment aimed at local demand, which is, of course, understandable, given the size of the country. But the big bulk of capital comes for export-oriented investments. Now, demand in Europe will be stagnating or will be declining, and it is in fact declining. So the car industry is basically already cutting down in central and eastern Europe too. Slovakia has completely specialized in the car industry: Peugeot, KIA and Volkswagen. But all these factories are actually laying off people and working reduced shifts. And this is not going to change for the next four to five years in any case. So, in central Europe you will have a sort of stagnant continuation of an existing pattern for the foreseeable future. If and whether that is really going to change, in my opinion, will depend on whether Chinese capital or east Asian capital is starting to use the region more as it opens up toward the European Union.
And this is happening. You see this in Slovakia with the KIA factory, for example. The big supplier for Apple in China, Foxconn, is investing in Hungary and, I think, in Romania too. Of course, there is an enormous pressure in east Asia to invest and accumulate its resources elsewhere. It would generate enormous inflation if they invested all of their capital reserves at home. So, I think there is a chance for some regional uplifting there. But given stagnating demand in Europe, it will be quite a slow process. So, I think, we know more or less where central and eastern Europe is heading. The institutions are largely neoliberalized, there is some paternalist vocabulary still in place with some minor paternalist gestures towards the wider population; labour unions are weak; party systems are weak; family and kinship serves as the primary social support system; I don’t see many structural changes taking place in the foreseeable future.
The really interesting cases are, I think, Ukraine and Russia, because they have, in a basic sense, a bit more policy space. They have not become vassals of the EU, they have a strong resource base, there will be upward pressure on resource prices worldwide. So that is not bad for either of them. Of course, the shale gas revolution in the United States and all the gas and oil capacities in the West will certainly decrease Russia’s internal manoeuverability, which may be a good thing politically speaking. But, nevertheless, there seems to be more political contingency than in central and eastern Europe there, in terms of the particular slot they have come to occupy. Clearly, large-scale export oriented mass manufacturing is not going to happen. I don’t see full-scale reindustrialization happening either in Ukraine or in Russia. What you might see is an increasing insertion in, let us say, global research networks and software.
VI: It sounds like the mottos of some of our politicians: let’s skip this industrialization stage, we should build a post-industrial economy. Don’t cry for bad old Soviet industry, now we need to move to the new economy…
DK: No, my claim is not performative but factual. I’m entirely in favour of an enormous supply of good employment for everybody, so I think that’s what your politicians are supposed to do. Of course, they are just turning necessity into a virtue. Where would the capital for that sort of high-skill manufacturing investment come from? Asia is much more attractive for global capital. That is where the large new proletariats are being created as peasants get pushed from the countryside and into almost Soviet style cities, or worse. And that is where the new “middle classes” are being formed. Don’t forget that after China we have India, we have Indonesia, Vietnam, the Philippines, Myanmar, right?
Read the interview with Richard Duncan in the last issue of New Left Review. Duncan is a maverick economist and hedge-fund manager, a typical mid-West American guy. He’s never been a part of a charmed circle of analysts or something, he is very idiosyncratic. Working in Asia, he figured out that the whole globalization equation could never work to the advantage of the United States because the masses of potential workers who would work for very low wages were simply too large for the system to retain its centre in the West. What he saw was that globalization would put an enormous downwards pressure on wages and manufacturing capacity in the West. And that is actually what happened, right? So, the uplifting story about globalization, I think, is by now largely rejected. And financialization is an expression of that. Financialization was first a massive capital export from the West to the East: in search of cheap labour. And then you had a massive flow-back of capital from east Asian accumulation into US T-bonds and suchlike in order to prevent local inflation in China, build up a diversified reserve and support the western consumption on which much of the Chinese miracle relied.
So this is the global equation. You need to ask how central and eastern Europe, Russia and Ukraine fit into that dynamic structural picture. So, international investments in industry and large-scale manufacturing, and interesting globally linked jobs will probably not happen in Russia and Ukraine on a very substantial scale. Internal accumulation is simply too solid for that, and local wages are too high. There is now a mass of young kids in Asia that flows into the labour market and depresses wages worldwide through their willingness to work 12 hours a day for a few dollars. In that global equation, there is basically no significant new space for capital flow into central and eastern Europe. A bit for central Europe perhaps because it is linked to the EU market, but hardly for Ukraine and Russia. So, what happens here will depend much on internal accumulation. Hence much will depend on politics.
It will be a very political capitalism; perhaps neoliberal, perhaps less neoliberal, the political fight is about that. It seems to me that where Ukrainian and Russian societies are heading depends much on political mobilization. And this is where, of course, the past trajectory comes in, with post-socialist transition and nomenklatura privatization and so on. Too much of these economies has become oligarchic again. A large part of social production is accumulated and controlled by a very small social fragment. In contrast to central and eastern Europe, the contingency inherent in Ukraine and Russia is structured around the capacity of large groups to mobilize, build alliances and lay claims to the internal revenues. So, in that sense, it is, perhaps, a more hopeful or in any case more exciting perspective.
VI: If our economies are not be based on large-scale mass industries, can we say that the capitalism developing here will move towards a kind of Third World peripheral capitalism supplying the West with raw materials? Or will it be a different kind of capitalism, so we cannot say that Russia and Ukraine are becoming banana republics, oil republics, metal republics and so on? What are the similarities and differences between classical peripheral capitalism as it developed in the colonies and post-colonies of European states in Latin America, Africa and Asia?
DK: It will occupy the same slot but this slot will be differently endowed. And the very simple reason for that is most commodities used to be in oversupply in the past, and they are not anymore. You’re saying there will be export of commodities to the West, well, there will be export of commodities to the West, East and South. The whole equation has changed with the industrialization and urbanization of China and India (countries that account for a third of the world population). So, it is at this point in time not necessarily so bad to be a large country that controls really strategic resources, from grain to gas, that are in high demand. There is no over-supply, there is over-demand. And that does create a different sort of potential political dynamic for these societies.
Everything depends on the capacity of people to actually mobilize around structural opportunities, and make stronger popular claims and strengthen democratic regulation. Whether that happens, whether that is sociologically and anthropologically speaking a real possibility, is of course an open question. But it makes these particular spaces more politically volatile and interesting. There is no fixed determination that emanates from the system to the sort of social lives that can be led in these places, including the sort of politics and political relationships. The question is, rather, whether such societies can muster the political creativity and acumen to push through the necessary reforms, to enforce substantial shifts in internal power balances; whether cities, universities, the public school systems and so on will be able to serve the rise of a left-democratic imagination and related political will or whether they will serve oligarchical appropriation.
Anastasia Riabchuk: The Third World region is also becoming differentiated as well. Can we speak about the Third World today as well? Because it looks like, well, the Second World is very problematic, but the First and the Third World are still very widely used, along with the Global North and Global South…
VI: Yes, but these are the core concepts of world-system analysis, we have the core, periphery and semi-periphery. So, if you are saying that these are becoming rather rough concepts that do not cover this differentiation, we need some really significant adjustment of these concepts…
DK: I very much agree about the need for new concepts in global analysis. If you follow Wallerstein, one key question in this dilemma sounds like this: is China semi-periphery or not? It goes unanswered. One time Wallerstein answers yes, the next, he rejects that answer. He doesn’t know, and in fact I think that is realistic. We simply don’t know. This is largely contingent. If you look at twentieth century history, the second time that a real competitor to the West emerged – after Germany (and Japan) – was, of course, the Soviet Union. It was a formidable competitor for quite a while. Perhaps not a market competitor but in any case a social and political competitor as concerns the ways in which you can produce urban modernity. We tend to forget that in retrospect. But the declining Soviet Union of the 1980s was not representative for the whole Cold War period. Until the late 1950s, the West was in an embattled mode as a consequence of fast Soviet urbanization, fast industrialization and impressive scientific achievements. That was a shock to the western system! It was a really existing alternative. The West in the interbellum period had made the cruel mistake of locking the Soviet Union out of the world trading system. And later, there was the Wall and the Cold War. So the systems were not allowed to experiment with their relationship and interpenetrate freely, which was still an open opportunity in the early 1920s.
Now we are again in the situation that you have a new, very populous, modern political space rising up. China, whose best resource is its human resource combined with the sheer power of its sovereignty, is of course decidedly larger as a social and economic space than the former Soviet Union. But it was allowed, and after 1978 eager, to insert itself in the western-dominated system. The key issue for world system analysis is whether the core states are able to protect the property rights on transferred technologies. It’s ultimately about that. Wallerstein’s notion of state power is crucially about the control over property rights and patents. State power in world systems analysis is essential for imposing rents, surplus value extraction and uneven exchange in the rest of the world, and that hinges entirely on the capacity to protect property rights and extract property rents, from both capital and technology.
In this respect, Western capitalism has been hollowed out rather seriously. Look for example at the technology of the high-speed train systems. It’s fabulous how fast China has appropriated western technology and implemented it all through the country. Where are the British and the Americans on these new and useful technologies? China has completely surpassed them in a matter of a few years. Here is a strong sovereign state that can de facto, it seems, negotiate with western capitalists about property rights, play them off against each other and put a massive, literate, well educated population to work in processes that it did not itself to invent. The nineteenth century German ascent was based on an appropriation of British technologies and massive investments in science and technology combined with the unification of its central European markets. The Soviet Union ascent, too, was dependent on a strong scientific base of its own, in combination with industrial copying and espionage and the creation of a large sheltered market for its products. Now a similar decentring of the system, once more to the (Eurasian) East, is happening.
Significantly, the rise of China happens in a completely open relationship with the West. This is entirely new. And that is also what makes the slot occupied in the global system by Ukraine and Russia at this point in time completely different from the classical raw material and commodities producers. You have competing cores: a western stagnating core with a lot of overall purchasing power and a claim to rents and profits generated elsewhere, and a growing eastern core with its high demand for resources. So if this significant shift in balances is occurring – the crucial factor that determines the developmental and social trajectory of a country like Ukraine becomes the actual practices of popular sovereignty and the popular claims to taking part in the distribution of the national product for which there is increasing demand.
VI: So you say that we have become just regular raw material producers not only for the West but also for China and some newly industrialized countries like Saudi Arabia. In the same way we are lowering standards of education, standards that were previously high. And we are losing our technologies, and we are not going to see another phase of industrialization or, if we do see one, it will be coming from some other countries with their capital. So, aren’t we peripheralizing?
DK: Yes, but the question is, is that a necessity and is it necessarily bad, and if so for whom? And I would say it ultimately comes down to political contingency and not structural necessity, because if you were able to impose larger democratic claims over the control and value of resources… Of course, if you privatize agricultural land entirely, you let the new land-grabbers profit from the structural dual position that you now have in the world system. The property rights on the land are not privatized, but the use of it is pretty privatized, and the revenues are being creamed off by a small group. Similar inequalities and hierarchies have developed in other sectors. And you are right: the continuous downward pressure on education and social research, on social rights, is a key part of that developmental equation. As it is elsewhere.
I am stressing the importance of strengthening social rights, urban creativity, education as a necessary precondition for a dynamic public sphere that could lead to stronger civic claims to national revenues against oligarchies, and that could also lead to growth in the cultural sector, tourism, and, who knows, “creative industries” or high technology. Oligarchic systems, however much philanthropy is going on, do not produce such dynamic societies. Marxian and classical liberal arguments do not differ in this regard. The necessity of a dynamic public life for progressive outcomes was always the point where they totally overlapped. They only differed as to the relative importance of common versus private resources in making this happen. Oligarchy, of the feudal or neoliberal type, was never deemed to be able to produce such progressive urban civilizations.
VI: State property has pretty much been totally privatized. It’s like a long-term lease, to the foreign countries as well, like China and EU member states, who are looking for their slot in Ukraine.
DK: I really think that this is ultimately politically contingent. There is no necessary degradation of public sectors going on, that is a political choice in countries like Ukraine and Russia. And that is actually different in the West, which is in a worse position, even though its starting position has of course been incomparably better. The West and western citizens are also much more indebted than people elsewhere are, even though that is partly to themselves, to their own rentier classes. And the crisis has only served to reinforce neoliberalism in the West. The West seems completely hooked on the political fights of the 1970s and 1980s, which never seem to stop. And this true for the Right and for the Left. For capital it would now be completely rational to say: “Let’s do central planning”. At this moment in time, close to 30 per cent of all liquidity in the western system is generated by the central banks. That is unprecedented. And it has to be so, because otherwise there would be massive deflation and crushing unemployment, as in the 1930s.
Perhaps, in about three to five years time, about 40 to 50 per cent of the money in circulation will simply be publicly provided. Planned. You will see how difficult it will be for the FED to substantially reduce their market injections of 85 billion dollars a month, a full trillion per year. They have just decided not to “taper” right now. And the ECB is again willing to inject a trillion euros into the banking system for free. The Bank of Japan is doing similar things. Now, the question is, if all of this money is public money, what do we want to do with it? Just consolidate the banks and other capitalist positions? With public money? Or is it going to be used in a more public and socially accountable, socially strategic way? We are in fact on the threshold of something that already resembles “central planning”. Capital would be fine with more public coordination and control if its enormous risks would be reduced and it got some guaranteed revenues, let us say two per cent per year.
But instead of such a rational and realistic course of action you get bi-party nonsense around austerity or Keynesian expansion on behalf of the banks and the car industries, and the further consolidation of neoliberalism. Politics seems completely locked into the old fights around national states and their historical myths. But we do live in a dramatically globalized world, our circumstances are substantially new as compared to the 1970s and 1980s. We are in fact close to a potentially socialist moment in the western system, where you can actually claim political sovereignty over capital accumulation and capital would not even be ready to fight it off aggressively. But the political imagination to do something with that moment is terrifyingly absent.
VI: Speaking about internal accumulation, some people point to the huge capital accumulated by Ukrainian and Russian oligarchs. Akhmetov is now something like the world’s twenty-sixth richest person. And they start to open branches in Georgia, in Africa… Some banks, like Privatbank in Ukraine, have affiliated banks and put ATMs with options in Ukrainian in Tbilisi. Can we speak about a kind of imperialism in accordance with the classical understanding of this term, or in this case, sub-imperialism?
DK: In fact it might be very interesting to think about it in a country like Ukraine or Russia. For example, Canada also thrives on resources and commodities. It’s, of course, in many ways interlinked with US capitalism, it receives investments from US carmakers and from Hollywood, but basically it’s the same sort of country as Ukraine and Russia. So, you might become this type of country, a social democratic resource-based semi-oligarchy. I think that ultimately this is a possibility for Ukraine and Russia too.
But again, Canada suffers a lot from this particular sort of capitalism as well. Its elites are basically running empires on their global commodities and are not always behaving responsibly for the country as a whole. They are plunging their cultural and educational investments into Toronto and are all too willing to shift it all to the Right with just a little cover of corporate responsibility and environmentalism or what have you. Again, the outcome largely depends on popular mobilization. Canada is actually a good example of that because over the last years you’ve seen wide interest in student mobilization in Montreal but also Toronto scores high as one of the capital cities of leftwing analysis. The particular set of relations emerging in Ukraine and Russia may work out in a Canadian way if you are able to develop real popular leftwing claims with some sort of real social force behind them.
VI: There is no real popular mobilization in Canada now though. The student movement was very active but basically these were claims made on the back foot.
AR: In this sense, some rightwing populists may say: We can do it! Could they do something good? Can they play a positive role in moving Ukraine in the direction you’re talking about?
DK: Of course, I am not a fan. But if you look at the Right in Hungary or Poland, they were willing to put populist forms of popular redistribution on the agenda much earlier than the Left were. Including punishing the bankers, including taxing the transnational sector more. I don’t think the Ukrainian Right is there, but if they really want to win elections or at least increase their share of the vote by 15 to 20 per cent and become a real political force, then they need to become really populist, and not just old-style fascist. And if that happens, they might actually produce something similar to the mobilization of the Right in Hungary and Poland; and this might in turn give the Left some courage to go beyond third-way niceties. I’m not saying I’m optimistic, and I don’t like these guys, but there may be a political logic in place that could lead to useful larger claims and to more democratic outcomes in the slightly longer term.
VI: And they have a very strong populist national-socialist wing where people are seriously talking about national and social revolution.
DK: So, the structural logic and politically contingent logic reinforce each other. It seems that many arrows are pointing in that direction. I think it will be very important for the Left to prevent a situation where they are only defending liberal freedoms and liberal “checks and balances”. That would be a dead loss. I think the lesson that the Left has to draw from rightwing mobilizations is that they must be much bolder in pitting real redistribution and popular claims to sovereignty against capital, oligarchy and the technocratic state on the agenda. They should be much more firmly engaged in aligning with labour and the labour issues around precarity. This is the tragedy of the Left in general, and the central and eastern European Left in particular: that it used to be just a politics of intellectuals or secular technocrats who were not really willing to engage with labour and the commons on which it relies.
VI: But if the country’s economy is not based on the large-scale mass production will the union strategy still be successful?
DK: First, when I talk about labour, I talk not primarily about unions but about all the people who depend on a wage to survive, large majorities. Union strategies can be incidentally successful here and there, but you cannot expect strong tripartism on the national level to emerge anymore, it seems. But what you could head toward is a sort of slightly Bonapartist state. And the question will be: is this right bonapartistm or left bonapartistm? And you can envision forms of mobilization: electoral mobilization, mobilization on the workshop floor, urban mobilizations that sustain a critical political culture. It’s mobilized urban political culture that pushes these bonapartists to the left. Very important will be that metropolitan cities and city publics will not be played off in politics against surrounding areas, as happened in Russia, for example. Putin is continuously playing off provincial cities organized around industries against the big cities organized around universities and “creative producers”. All the big cities would go for liberalization, all the provincial cities would go for Putin.
Also for Ukraine, I would think that this it is important to forge and sustain inter-urban alliances and not the sort of single-minded focus on the capital city and perhaps one or two other big places. This is what rightists teach us, in fact. And we have lost the first fight. But we don’t need to lose for the next 10 to 15 years. I am very much in favour of a realist analysis of politics and power, I’m not that interested in utopian leftism here. I think that the future of leftwing politics does lie in populism. But I also think that the future of left populism lies in its readiness to nurture radical hopes, visions and analysis. Contrary to anarchists, I have nothing against an avant-garde. It just shouldn’t turn into a bureaucratic avant-garde. And it should be both radical and realistic and, while brave, also responsible.
VI: In fact it’s quite a hot issue for leftists now: should we build a leftist Svoboda? Or is it the case that we don’t like bonapartism, we don’t like personalism, we don’t need this kind of one-people oriented politics like in Venezuela and some other Latin American countries? This issue was highlighted by the poor performance of leftist candidates in the Ukrainian parliamentary election of 2012 (Borotba party). They tried some majoritarian districts with scanty results. But it was also their first time. Svoboda has existed for more than 20 years and they quite consistently mobilized the western regions, then moved on to southern and eastern Ukraine. Only half of the votes they won came from their western stronghold, another half came were from Kyiv and also from eastern Ukrainian regions voting for some radical opposition to Yanukovych. So what do you think about it, should we create some kind of analogous party?
DK: Populism is all somehow personalistic but for the Right it is a different sort of personalism, I have nothing against that in principle. Latin American parties have always been personalistic, they can slowly institutionalize over time, like PT in Brazil, for example, though that generates its own contradictions, as we’ve seen recently. Similar issues arise with regard to charisma. The anarchists don’t like it and think you can produce popular will without it. I’m not so sure.
AR: Populists are not very interested in education, on the contrary, they are interested in the less educated…
DK: No, that’s not necessarily the case. That is rightwing populism. But leftwing populists have everywhere been great popular educators, in the North, South, East and West. Leftwing populism is very much about education, in fact. Just look at Chavez’s Bolivarian university, which educates hundreds of thousands of lower class students for BA degrees. It is easy to criticize its lack of resources and its shift to vocational training and so on, but it is a daring initiative in any case and it points the way for the Left in the Global South and the East.
Look at Latin America. Those populist leftist parties are driven by the intellectual Left. And it’s the intellectual Left that remains popular. That is so different from central and eastern Europe. Communism has created a great split between intellectual elites and the wider population. And historically they have found it terribly difficult to trust each other. I’ve always felt this close to my skin when I go to Poland. The first time I started to work in Poland, I started to work with philosophers. They couldn’t deal with working-class people! They thought they were dirty, they had no control over their vocabulary, they were not certain about what they were saying, and so all the interviews that I got had at the end a section in which the interviewer gives a sort of psychotherapeutic analysis of the interviewee, often completely debunking them. I’ve never seen something like that! These were just students, 22 to 25 years old. Where the hell did they get that elitist racism from? State communism has led to a very tragic split between intellectual elites and the wider population. Stalinism has been very bad for that. And that is the big difference to Latin America.
So when I’m talking about populism, I really think about Latin American styles of populism that you could also perhaps develop, though the political culture of leftwing populism is simply not available yet. I also see that in Hungary, and it’s very difficult to develop. You can generate a leftist debate among university students these days, with a hundred people in a basement, and it’s fun, it’s intellectual, and it goes somewhere. But at the moment we really need to help generate and associate with popular forces and we don’t know how to do that. I think you have to start to try to like them, even just provisionally, or as a mere possibility. I think it’s the only path for the Left that is realistic, and it could help to draw the bonapartisms that are developing in Russia and Ukraine slightly to the left. Of course, the left must have some sort of an alliance, an affinity, however tenuous, with liberalism. That has historically been the case and should be the case in the future too. But it’s a tenuous affinity and not the primary goal. And we are not dependent on it.